The value of the average defined benefit (DB) fund in Ireland rose by 10% over the course of 2013, according to Mercer.
The consultancy cited “tremendous” 20% returns from global equities as the driving factor behind the growth and noted that it would deliver “some relief” to a sector where previously eight out of 10 funds failed to meet the minimum funding standard.
The claims were backed up by figures from Rubicon Investment Consulting, showing the average 2013 return across 10 Irish pension managed fund as 16.6%.
According to the firm’s Pensions Risk Survey for 2013, deficits among companies listed on the Irish Stock Exchange and semi-state organisations, such as ESB, fell by €1.6bn over the 12 months to December.
Sean O’Donovan, head of Mercer’s DB risk group, said trustees had benefitted from the strong returns but were also more prepared for the volatile market conditions seen in the past few years.
“Pension schemes are better positioned than in 2000 or 2008 to protect their gains,” he said. “Many schemes have put in place investment strategies where they systematically de-risk as funding levels improve.”
O’Donovan added that, among the consultancy’s clients, 2013 saw more than 30 funding triggers fulfilled, resuling in de-risking.
The Mercer partner said many companies were now putting in place journey plans to reduce pension risk over time.
However, the Pensions Board’s chief executive Brendan Kennedy has previously noted that many schemes did not appear happy with the amont of de-risking expected of them.
He told the Irish Association of Pension Funds’ annual benefits conference last year that it was “very clear” from schemes’ funding proposals that they were commiting to “begrudgingly and at the minimum rate possible” to de-risking.
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